What is the second home building financing process?
To build a second home, a borrower must procure a construction loan and then refinance the debt into a permanent mortgage. This requires two separate loan closings on the behalf of the borrower.SignificanceTo procure a construction loan, a borrower must have a set of architectural plans, a builder and a cost to construct budget.FunctionThe construction loan will allow the borrower to pay the builder in installments as the building process takes place. Once a predetermined level of construction is complete, a payment is given to the builder until the home is complete.TypesThe construction loan is typically a short term debt, 12 months in length or less, with a variable interest rate. The refinanced, long term debt can be a fixed or variable interest rate product with a term ranging from 10 to 50 years.ConsiderationsThe documentation required for the construction loan will focus on the construction itself, from builder specifics to the home plans.
